Goldman Sheds Light on Changing Composition of Federal Reserve Board

News outlets (including Barron's) have been covering rumored candidates for three open positions on the Federal Reserve Board of Governors.

Here's three that the Trump administration is reportedly considering nominating (who would need to be confirmed by the Senate):

For vice-chairman, Randal Quarles, a Treasury official in the George W. Bush Administration

For the community banking seat, Robert Jones, the chairman and CEO of Old National Bancorp

For vice chair for supervision of banks, Marvin Goodfriend, a professor at Carnegie Mellon and a former economist at the Richmond Fed

Goldman Sachs economists weighed in on the topic with a Q&A Wednesday that makes some interesting points about what the changes in personal could mean for the next Fed chair.

They point out that if the Trump administration fills all three vacancies with new appointments, the next Fed Chair will have to come from the current slate. Janet Yellen's term as Fed Chair is up in February 2018.

Alec Phillips writes:

This could mean the reappointment of Chair Yellen, the nomination of another sitting Board member like Governor Powell, or the appointment of an incoming Board member, like Marvin Goodfriend. We have not ruled out the possibility that Chair Yellen could be reappointed, but it is worth noting that even with a vice chair for supervision in place, the next Fed chair will still have significant influence over financial regulation. In light of the emphasis the President has put on that issue, he seems likely to prefer a chair with a view on regulatory issues closer to his own.

He sees some other options for how the chair shuffling could work out, but here's the one he views as most likely:

The White House could make two nominations in the near term, leaving one Board vacancy open until later this year when the President nominates a new chair. This would likely mean that the vice chairman for supervision would be nominated in the near term, along with one other governor. From the Administration's perspective, the disadvantage of doing this would be that it would reduce the number of Fed governors who support the Administration's deregulatory approach. The advantage would be that it would allow maximum predictability in selecting a new Fed chair.

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